Capmark's $147 million lawsuit against Goldman thrown out

Nick Brown

3 Min Read

NEW YORK (Reuters) - A federal judge halted a bid by real estate lender Capmark Financial Group CPMK.PK to recover $147 million from Goldman Sachs (GS.N) in connection with alleged conflicts of interest stemming from Capmark’s debt restructuring.

A Goldman Sachs sign is seen over the company's trading stall on the floor at the New York Stock Exchange, March 21, 2013. REUTERS/Brendan McDermid

In a written ruling on Tuesday, U.S. District Judge Robert Sweet in Manhattan said Capmark’s arguments were barred because they contradicted statements it made in 2010, while bankrupt.

Capmark had accused Goldman of obtaining the payments by taking advantage of its dual role as one of Capmark’s lenders while also holding a seat on its board.

Goldman acquired a 74 percent stake in Capmark in 2006, in connection with advancing $8.7 billion in credit facilities. It later placed Bradley Gross, one of its managing directors, on Capmark’s board.

In May 2009, Capmark entered into a new, $1.5 billion credit facility to help it repay some of the initial debt. It contends that it paid Goldman $147 million in connection with reducing the size of the loan, a deal Goldman could manipulate because of its presence on the company’s board.

Capmark filed for bankruptcy about five months later, in October 2009.

Sweet dismissed the lawsuit, saying Capmark flip-flopped on statements it made while in bankruptcy.

In 2010, as part of a settlement of similar claims in U.S. Bankruptcy Court in Delaware, Capmark argued that the Goldman loan restructuring was the “hard-fought” result of “arm’s-length” negotiations.

That argument benefited Capmark because the settlement saved the company millions of dollars, Sweet said. Capmark cannot now present an argument that “requires a finding that the ... negotiations were not conducted at arm’s length,” Sweet said.

A spokesperson for Capmark could not immediately be reached for comment. A lawyer for the company did not return a call.

Goldman spokesman Michael DuVally said the bank was “pleased the claims were dismissed.”